LONDON (SHARECAST) - Investec has upgraded its rating for Argos and Homebase owner Home Retail Group, saying that the firm's second-quarter trading statement next week could see a pick up in sentiment.
The broker is forecasting a second-quarter of improved like-for-like (LFL) sales from Argos. Given its expectation of a continuation of stronger electrical product sales - these account for half of divisional sales - the broker estimates that LFL sales will be down "only 0.8%".
"While the market short position in Home Retail has retreated, it remains very high and we therefore believe the shares should react positively to evidence of more resilient trading at Argos," Investec said on Monday morning.
"With share price risk weighted to the upside in our view, we are therefore moving from 'sell' to 'buy', with a new target price of 109p (70p previously)."
According to the broker's calculations, Home Retail's trading activities are valued at a forward price-to-earnings ratio of just over three times, compared with the sector average multiple of 12.
By 11:10, shares were up 3.25% at 96.90p.
BC
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